Share

The solid reputation of Hong Kong's legal system is spreading across the country, drawing a steady increase in mainland parties seeking the city's arbitration services to resolve disputes.

As much as 40 per cent of the arbitration cases handled by the city's International Arbitration Centre last year involved mainland parties - compared with only 22.8 per cent in 2008. The second parties in the disputes are sometimes Hongkongers, but often they are foreigners drawn to the city's neutral jurisdiction.

Wong Kwai-huen, the centre's chairman, explained that mainland parties would rather have arbitration in nearby Hong Kong than in some distant foreign country. Further, the city's established common law system and judicial independence inspire confidence.

For their part, the foreign parties in the dispute have far more trust in city's legal system than the mainland's, and welcome arbitration here, he said.

"Many overseas parties, especially those from common law jurisdictions, may feel reluctant to have their disputes handled in places with a different legal system, which is unfamiliar to them. So, many of them feel more confident about taking their cases to Hong Kong," Wong said.

The city has become the arbitration centre for the entire region, he said.

The centre has handled one dispute involving US$1 billion, but most are in the range of US$1 million to US$2 million.

Out of 293 arbitration cases handled last year, 119 were related to the mainland. In 2008, there were 85 mainland-related cases out of 373 disputes handled. From 2009 to 2011, the proportion ranged between 31 and 35 per cent.

Hong Kong's expertise in different areas of legal arbitration enables it to handle a wide range of cross-national disputes, including construction, shipping, contractual and commercial disputes of various natures, Wong said.

Parties can even invite arbitrators from overseas to come to Hong Kong to conduct the process, or our arbitrators can cross the border to conduct arbitration

"Parties can even invite arbitrators from overseas to come to Hong Kong to conduct the process, or our arbitrators can cross the border to conduct arbitration," he said, adding that this flexibility and breadth gives it an edge over other centres in the region. The centre has 319 arbitrators.

The South China Morning Post reported in January that a dispute over a US$500 million railway contract between the Philippine government and a large Chinese state-owned company - China National Machinery and Equipment Corporation - will be heard at the centre.

The case has been hailed as a vote of confidence in the city's judicial independence.

Hong Kong and Beijing signed a pact in 2006 making commercial judgments delivered in each others' courts enforceable on both sides of the border.

But the " Arrangement on Reciprocal Enforcement of Judgments in Civil and Commercial Matters" has rarely been put to use, despite the flourishing cross-border business in the intervening years.

Figures obtained by the Post from the Hong Kong judiciary reveal that the city's courts have not handled even a single application from individuals or companies bringing their mainland judgments over for enforcement. The mechanism went into use in 2008.

Going in the other direction, up to September last year, eight attempts have been made to get Hong Kong judgments enforced on the mainland.

Litigation is not a mainstream dispute resolution in the commercial world, Wong said.

Rather, parties generally prefer to settle through arbitration or mediation, where both the results and the processes remain confidential, he said.